Bill Gates is a relative newcomer to the fight against global warming, but he's already shifting the debate over climate change. In recent years, America's wealthiest man has begun to tackle energy issues in a major way, investing millions in everything from high-capacity batteries to machines that can scrub carbon dioxide out of the air. With a personal fortune of $50 billion, Gates has the resources to give his favorite solutions a major boost. But it's his status as America's most successful entrepreneur that gives his views the most clout: "His voice carries enormous credibility about how technology can be used to solve global warming," says Fred Krupp, head of the Environmental Defense Fund.

When it comes to climate and energy, Gates is a radical consumerist. In his view, energy consumption is good — it just needs to be clean energy. As he sees it, the biggest challenge is not persuading Americans to buy more efficient refrigerators or trade in their SUVs for hybrids; it's figuring out how to raise the standard of living in the developing world without wrecking the climate. Achieving that, he argues, will require an "energy miracle" — a technological breakthrough that creates an inexhaustible supply of carbon-free energy. Although he doesn't know what form that miracle will take, he knows we need to think big. "We don't really grasp the scale of the problem we're facing," Gates tells me in his office overlooking Lake Washington in Seattle. "The right goal is not to cut our carbon emissions in half. The right goal is zero."

Since leaving Microsoft, you're best known for your work combating poverty and disease in the developing world. Why add climate change and energy issues to the list? Well, energy would be superinteresting and important even if it wasn't for the terrible climate problem. The thing that really changed in civilization — only about 250 years ago — was an intense use of energy. It changed everything: transportation and food and appliances and communication. Today, we're very dependent on cheap energy. We just take it for granted — all the things you have in the house, the way industry works. I'm interested in making sure the poorest countries don't get left behind, so figuring out how they can get cheap energy is very, very important. Whether it's fertilizing crops or building housing, a lot of it comes down to energy.

So we need more energy for the poor and less for the rich? It's the poorer people in tropical zones who will get really hit by climate change — as well as some ecosystems, which nobody wants to see disappear. This is a global thing, and it's really hard for people to get their minds around the amount of reduction required. Every year we're increasing the amount of CO2 we put out, and yet we're talking about an 80 percent reduction. To make that happen, the rich world is going to have to be way down — way down — in energy use.

You say we need an "energy miracle" to halt climate change. What do you mean? To have the kind of reliable energy we expect, and to have it be cheaper and zero carbon, we need to pursue every available path to achieve a really big breakthrough. I certainly don't want the government to only pick a few paths, because our probability of success is much higher if we're pursuing many, many paths. Think about all the people who are getting up every day and working on solutions that may seem kind of delusional even though the odds against them are higher than they realize. The world needs all these people trying things out and believing in them. In IT, there were tons of dead ends — but there was enough of a success rate to have an unbelievable impact.

Handicap it for me: Which technological paths look the most promising to you? You can certainly limit things by their potential scale. There are a few places on the planet that can produce tidal energy, for example, but that alone won't ever be gigantic. Geothermal, because of the formations and the amount of heat that comes through, is also going to be pretty minor. So what you're left with is: Can you make fossil fuels carbon-free? That's important to pursue but very hard to achieve.

How about developing technology to capture and store carbon from coal plants? America's Power [a coal-industry PR group] has these ads recently where they're talking about "clean coal." But there are a number of steps required to do that, and they aren't really being done. For instance: The government has got to take responsibility for the long-term waste. They messed up on nuclear waste at Yucca Mountain, and the long-term waste from clean coal would be a billion times larger. The issue of "where to put the waste" is the hardest because of the consensus that's required.

What about nuclear energy? You're very involved with developing what are known as next-generation nuclear plants. The nuclear approach I'm involved in is called a traveling-wave reactor, which uses waste uranium for fuel. There's a lot of things that have to go right for that dream to come true — many decades of building demo plants, proving the economics are right. But if it does, you could have cheaper energy with no CO2 emissions. You'll still have issues with safety, proliferation, cost and fuel availability. But part of the beauty of the nuclear path, compared to all the energy-farming approaches, is you don't have a problem with location and storage.

By energy farming, you mean stuff like wind and solar? Wind, solar, anything where you're just collecting the natural flux. The trouble with energy farming is that the energy isn't always where you want to use it, and it isn't always when you want to use it. So you have a tough transmission problem, which is often across political boundaries, and you have a tough storage problem — "tough" as in "may not be able to invent the solution."

Does the work of climate deniers play a part in preventing action? People are at so many different places on this problem, it's hard to get a dialogue going. There are people who don't even know there's something important here at all — people who think, "Geez, is this real?" That's unfortunate. The fact that we're still arguing over "Is it real, yes or no?" has kind of clouded the debate. The real issue is, "Wait a minute — how soon and how big are these effects, and what does mitigation look like?"

You've just come back from China, which many people argue is beating us at energy innovation. Do you agree? In order for the United States to do the right things for the long term, it appears to be helpful for us to have the prospect of humiliation. Sputnik helped us fund good science — really good science, the semiconductor came out of it. And in the 1980s, we were driven by state-sanctioned racism — the idea that Japan was going to take over everything. But look at consumer electronics today — it's Xbox, iPhone. Sometimes you overestimate your rival, and that can actually help.

Energy innovation is not a nationalistic game. If tomorrow some other country invented cheap energy with no CO2 output, would that be a bad day or a good day? For anybody who's reasonable, that would be, like, the best day ever. If all you care about is America's relative position, every day since the end of World War II has really been bad for you. So when somebody says to me, "Oh, the Chinese are helping to lower the cost of it, or creating something that emits less CO2," I say, "Great." The Chinese are also working on new drugs. When your children get sick, they might be able to take those drugs.

Let's say President Obama comes to you and says, "We need to make this energy transition happen quicker. Bill, you are going to be my energy guy." What are the two or three things you would tell him we should do right now, politics aside? The first is a pretty dramatic increase in research and development — about $10 billion a year extra. The U.S. government has an annual budget of $3.5 trillion, so that's not a lot of money percentage-wise. To pay for it, you could tax energy usage at a very modest level, between one and two percent. That would make it budget-neutral.

Then you need a real energy plan. One example: If you're going to get sun and wind power out of the center of the country, you have to do some amazing transmission stuff out to the coasts. But if offshore wind is going to be gigantic, then the need for transmission is less imperative. Building transmission takes decades, so you've got to really have a plan that considers each option based on the likelihood of success. You have to write down the probabilities so you can shift resources as the probabilities shift.

What have you learned about energy politics in your trips to Washington? The politics are hard. Anybody who thinks that once upon a time you just called up George Washington and he solved a messy problem like this — it's never happened that way.

The most important thing is to start working on the long-lead-time stuff early. That's why the funding for R&D feels urgent to me. If you said to me, "Hey, you can get R&D now in return for a carbon cap eight years from now," that would be a pretty good trade. The key thing about R&D is, it causes you to build different energy plants when the ones you have wear out. That's a 30-year decision, what you're putting in that place. If people knew there will be a carbon tax during the life of that plant, that really starts to change the decision.

What grade would you give the Obama administration on their energy policy? I don't think I'd give them any different grade than they'd give themselves. They wanted to get additional R&D money, and they wanted to get some type of price signal in on carbon, and they haven't succeeded in doing it yet, so I think they'd give themselves an incomplete and I'd give them an incomplete. It may stay that way. Should they be trying harder? They have a lot of things going on.

Are you scared about the kind of world — and the kind of climate — your kids will inherit? Climate change is a terrible problem, and it absolutely needs to be solved. It deserves to be a huge priority. But when you think of kids, you think of more immediate things like, "Will terrorists blow up a nuclear bomb?" When you start thinking about kids, I hope they fasten their seat belts. There's a lot to worry about.